UK taxpayers waste £4.6 billion in unnecessary tax

Most Brits are firmly opposed to the idea of dodging our taxes. But according to new figures we may be taking our commitment to the tax man just a bit too far. We're not just paying our fair share: we're paying someone else's too, and collectively we are paying £4.6 million too much.

There are four ways we should all be bringing our tax bills down - without suffering the fate of Jimmy Carr.

The study, by unbiased.co.uk and TaxCalc 2013 Tax Action, found that the average taxpayer is paying £153 too much every year. The experts behind the study suggested four ways in which we are wasting our cash - and proposed sensible solutions.

1. ISAs

Some 30% of all overpaid tax comes from the fact that we're not taking advantage of our ISA allowances. No-one is getting a fortune in income from their cash savings at the moment, but the little we do get ought not to be taxed.

The study showed that we're wasting £311 million in interest on savings (as well as almost a billion in not having the better interest rates that tend to be paid on ISA accounts). The research also reveals that a further £1.3 million is being wasted, because we're not signing up for the Junior ISAs we are eligible for.

We're also missing out on tax breaks from stocks and shares ISAs. Around 1.6 million of us keep stocks and shares outside an ISA at the moment. If we converted these into ISAs, we could save £62 million.

It's vital, therefore, that we look at our savings and investments, and move our full allowance into an ISA each year.

2. Pensions

The research shows that nearly 4.3 million people (not currently paying into a pension but who would potentially consider it) are currently leaving £2.6 billion of income tax relief on pension contributions unused.

If we paid in the average annual contribution of £3,010, we could boost our pension pot by as much as £602 each and £2.6 billion collectively, simply by taking advantage of tax relief on pension contributions.

3. Capital Gains Tax

We could be wasting as much as £171 million in unnecessary capital gains tax (CGT), by not making use of tax efficient strategies and allowances.

You have to pay CGT when you sell assets that have increased in value - like shares or second properties. At the moment we all have an allowance each year of £10,600. Any gain above the allowance is charged at 18% for lower and 28% for higher rate tax payers.

A great deal can be saved purely by timing any sale to take advantage of your allowance over a number of years. Alternatively there are a number of ways of using ISAs for this, not least ensuring that any shares are held in an ISA from the outset.

4. Inheritance tax

A bit of planning could save £472 million in inheritance tax - which is taxed at an incredible 40% on anything you own worth more than £325,000.

There are a couple of simple steps. The first is that if you have taken out life insurance, you should place it 'under trust', so it doesn't count as part of your estate.

If you have the assets to spare, you can also take advantage of annual gifting limits, giving cash away as you go along rather than saving it up for a bumper payout and spending a fortune on tax instead.

Karen Barrett comments: "The message is clear - take time to understand your tax position, make the most of tax reliefs and allowances available to you and ensure that you are being as tax efficient as possible."

The gang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.

The gang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.

The gang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.

Sentenced in 2012: Lee Sellers, Mehmood Khan Nazir, Umar Khan Nazir and Marshall Boston – 10 years 6 monthsgang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.

Sentenced in 2012: Lee Sellers, Mehmood Khan Nazir, Umar Khan Nazir and Marshall Boston – 10 years 6 monthse gang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.

Please get your facts right. Tax avoidance and tax evasion are not the same thing. Anyone who takes advantage of something that is deliberately in place, like saving in an ISA, is avoiding tax. These measures are there to encourage certain behaviour.

Saying the two are the same is like saying that someone driving a lower CO2 car is evading the higher rate of vehicle duty.

Talk about waste, January 29th figures revealed in Parliament showed that we send Â£55.1 million in benefits to families living abroad permanetly, mainly Polish and all this whilst we Brits have to sit by and watch this spineless Government pillage the pockets of hard pressed UK families. This is deeply unfair and just reflects the lack of support for the coalition, and in my opinion UKIP will wipe the floor with them at the next election.

I was reading this and just about to put bluster and spittle into word sand your first line says it all !What a load of tosh this article is, are we all idiots - no, most people are money savvy if they have it in anyway spare. We don't need to be lectured by pompous fools.

So, all of these are assuming that you have a fair bit of spare money lying around.

To save the tax on an ISA you have to have that much capital that you can leave untouched, to save on pension taxes you have to be able to afford to pay into a pension, capital gains tax assumes that you have an odd house or two or other valuables to sell, and inheritance tax is self explanatory. Waiting for someone to die so not a lot you, as the inheritor, can do to affect the amount of tax that is paid, except maybe pay out for a smart solicitor when the time comes.

And there was me thinking that there was a way we mere mortals could save on the taxes we don\'t seem to be able to avoid, like VAT and fuel duty. The only one we have managed are the taxes on alchohol - by making our own wine and cider.